1. strategy+business
REPRINT 16109
ISSUE 82 SPRING 2016
MODERATED BY GEORGE ROTH AND ART KLEINER
AN S+B ROUNDTABLE
Danaher’s Instruments
of Change
Highly focused and diversified, this industrial company
grows through acquisition, customer-facing innovation,
and continuous improvement.

2. strategy+businessissue82
featurestrategy&leadership
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3. CapableCompany:
Danaher
IllustrationbyJohnHersey
Danaher’s
Instruments
ofChange
AN S+B ROUNDTABLE
Moderated by
George Roth and Art Kleiner
Highly focused and diversified, this
industrial company grows through
acquisition, customer-facing innovation,
and continuous improvement. featurestrategy&leadership
2

4. strategy+businessissue82
3
George L. Roth
groth@mit.edu
is a research associate at
the MIT Sloan School of
Management and a visiting
associate professor of
management at the University
of New Hampshire. He is a
coauthor, with Anthony
DiBella, of Systemic Change
Management: Five Capabilities
for Improving Enterprises
(Palgrave Macmillan, 2015).
Art Kleiner
kleiner_art@
strategy-business.com
is editor-in-chief of
strategy+business.
W
hen the Danaher Corpora-
tion announced in May 2015
that it would split into two
separate enterprises in 2016,
it seemed at first like a reversal
of the company’s history. Danaher had built itself into
a remarkably successful business over four decades by
acquiring and integrating new companies into a unified
whole, improving them through a group of distinctive
management practices known as the Danaher Business
System (DBS), then holding onto them. Although it’s
sometimes compared to a private equity firm, Danaher
is different — it buys and builds companies for the long
term, not for rapid fix-up and sale. Divesting is not the
Danaher modus operandi.
But from a strategic point of view, the split makes
sense. Although these two new companies have a com-
mon heritage and management approach, their busi-
nesses are distinct enough from each other that they
require different capabilities.
One new company, which will retain the Danaher
name, will focus on science and technology businesses.
Generally, these are enterprises with resilient business
models, strong long-term growth, high gross margins,
and significant business in aftermarket products, such
as replacement parts and upgrades. The other company,
Fortive Corporation, will be made up of what Dana-
her calls its “industrial growth” enterprises. These are
industrial end-market businesses with slightly more
cyclical markets, high operating margins, and strong
cash flow. The split is intended to provide each com-
pany with its own focus and to increase capital deploy-
ment flexibility, thus providing more opportunities for
growth in each company’s distinctive way.
Distinctive capabilities have been central to Dana-
her’s success since the mid-1980s, when Mitchell Rales
and Steven Rales, two brothers who owned a commer-
cial real estate business, discovered they had a knack for
buying and turning around ailing manufacturing com-
panies. Over the years, the company had evolved from
a highly leveraged startup to a profitable family of ven-
tures with a market capitalization of more than US$40
billion in 2013. The Raleses, who had named Danaher
after a Montana creek where they often fished, had in-
vested heavily in the management skills of the people
who ran it and its member firms. They and the oth-
er company leaders had developed a unique approach
they called the Danaher Business System. This inten-
sive continuous improvement program, derived from
the Japanese quality movement, was augmented with
homegrown approaches to innovation, commercializa-
tion, and leadership development that involved every
level of management and were led directly by the com-
pany’s successive CEOs.
At strategy+business, we have covered Danaher’s
prowess with acquisitions (see “The Capabilities Premi-
um in M&A,” by Gerald Adolph, Cesare Mainardi, and
J. Neely, s+b, Feb. 22, 2012, and “Deals That Win,” by
J. Neely, John Jullens, and Joerg Krings, s+b, July 14,
2015), but it wasn’t until we researched the book Strategy
That Works (see “Creating a Strategy That Works,” by
Paul Leinwand and Cesare Mainardi, s+b, Spring 2016)
that we realized how far Danaher’s capabilities have taken
the company. The executive interviews in this roundtable
were conducted in 2012 and rechecked and updated for
this article. They show how an enterprise that organizes
itself around what it does best can generate a long-term
track record of consistent success.
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Original Systems
DAN COMAS: The founders, Steve and Mitch Rales, start-
ed out in the 1980s with a real estate company. They
bought some poorly run manufacturing companies,
and discovered they could rebuild them and run them
profitably. It was a better business than real estate. Be-
tween 1985 and 1990, their little company went from
almost nothing to a market cap of about $400 million.
GEORGE KOENIGSAECKER: The Danaher Business System
was born in 1986, when I was the president of the Ja-
cobs Manufacturing Company in Bloomfield, Conn.
“Jake Brake” was a formerly family-owned business that
made brakes for diesel trucks. In 1984, the company
had merged with Chicago Pneumatic, a maker of power
tools and industrial equipment, which Danaher subse-
quently bought.
Jake Brake was profitable, but it was ready to col-
lapse because it was abusive to its customers, who be-
gan to look for alternatives. I had been convinced of the
power of the lean approach ever since I had worked with
a Japanese–U.S. joint venture several years before. So I
started to adopt that approach as a laboratory for change.
In early 1988, I learned that Yoshiki Iwata and
Chihiro Nakao, two Toyota Production System sensei
who had been handpicked disciples of its chief architect,
Taiichi Ohno, were teaching at the University of Hart-
ford. I took them to dinner and asked if their consult-
ing company, Shingijutsu, could help us. Before saying
yes, they demanded to see the plant, right away. There
was a lot of anti-Japanese sentiment then, especially in
the United Auto Workers, our union. So when I arrived
at 11 p.m. with two Japanese guys, it got the attention
of everyone on the night shift.
Danaher’s Identity Profile
With headquarters in Washington, D.C., Danaher is a group of compa-
nies that produce instrumentation and solutions for a broad range of
end markets, including healthcare diagnostics, life science research,
industrial manufacturing, maintenance, and service. With a global
workforce of 71,000, it had revenues of $19.9 billion in 2014. Since 1980,
its annualized returns to shareholders have been three times as high
as those of the Standard & Poor’s Industrials Index. A split into two en-
terprises, Danaher and Fortive, is planned for the second half of 2016.
Value proposition: As a “company that builds companies,” this
consolidator adds value through M&A and operational excellence. Its
member companies are B2B category leaders, consistently offering
high-quality products and solutions to professional, medical,
industrial, and commercial customers.
Capabilities System
• Acquisition and integration: Danaher succeeds by acquiring and
integrating companies that will thrive within its culture and with its
capabilities system.
• Leadership development: Through this capability, the company
engages people in learning sophisticated management practices.
• Intensive continuous improvement (the Danaher Business System):
This capability drives operational improvement of quality, service, reli-
ability, and cost, generating above-market growth and profitability.
• Scientific and technical innovation: Danaher’s innovation capability
enables product development that meets the evolving needs of its
diverse customer base.
• Portfolio of products and services: Danaher has more than
40 businesses spanning five segments: industrial (Kollmorgen,
Videojet); test and measurement instruments (Fluke, Tektronix);
dental (Kavo, Kerr); life sciences and diagnostics (Beckman Coulter,
Radiometer); and environmental (Hach, Gilbarco Veeder-Root).
—Adapted from Strategy That Works: How Winning Companies Close the
Strategy-to-Execution Gap
CapableCompany:
Danaher
Distinctive capabilities have
been central to Danaher’s
success since the mid-1980s.
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As we walked around, Iwata made little jabs:
“It’s a big warehouse. Where is your factory?” We
were obviously buried in work-in-process. He said it
was the worst factory he’d ever seen: “You should
be fired immediately.” Finally, we got to our most
important cell. “Would you like to fix it now?”
he asked.
The machine layout was backward. We’d set it
up clockwise. If we changed it to counterclock-
wise, each worker would use his right arm, which is
3 percent stronger on average. That would get us a 3
percent productivity gain. But we would have to move
all the machines.
We worked until 5 a.m. redesigning the cell. This
event launched a total transformation of our produc-
tion system. We started working with Shingijutsu for
a week every month. There’s magic in that weeklong
cycle. It’s long enough to study, make changes, and get
the change semi-established. Things began to move at
a blistering pace.
Danaher bought Chicago Pneumatic in a hostile
takeover around the same time. As the new owners,
Steve and Mitch Rales came up to see what we were
doing. We thought they would kill our new approach.
But their lack of an operations background turned out
to be a godsend. If they’d been conventional manu-
facturing guys, it wouldn’t have made sense to them.
But fortunately, they knew nothing about manufactur-
ing, and it seemed logical — plus we were delivering
strong productivity numbers. They asked us to make
a presentation at Danaher’s first-ever corporate meet-
ing, later that year. Soon after that, we had established
these practices as the beginning of the Danaher Busi-
ness System.
JIM LICO: That Jake Brake plant is still a Danaher sub-
sidiary. It has a huge market share, great customer satis-
faction, and a high level of quality. Its example showed
us the power of lean production in turning a business
around — and in funding acquisitions by generat-
ing cash from operations. Probably every senior leader
at Danaher can tell the story of saving the Jake Brake
plant. It’s passed down from one generation of leaders to
the next; it helps us learn why we are who we are.
STEVE SIMMS: As we grew the company through acqui-
sitions, we rolled out the Danaher Business System to
each new piece. We set up kaizen [continuous improve-
ment] sessions and policy deployment [PD] reviews for
every business. [PD reviews, also called hoshin meet-
ings, are in-depth structured sessions used to assess
progress toward previously agreed-upon goals.] We
encouraged team members at every level of the com-
pany to take responsibility for specific pieces. Whether
you’re in a strategic plan review, an operating review, or
a growth initiative, or walking the plant floor, all the
questions and challenging come back to some aspect of
“How do we get better?”
This isn’t something we would just talk about be-
fore an analyst conference or board meeting. People
at Danaher talk about it every single day. It leads to
great, rich discussions everywhere, including parts
of the business outside the factory. You go to people
down in payables for a day sales outstanding [DSO]
number, and they say they don’t have it. You can push
back, suggesting they use some of the DBS [Danaher
Business System] tools or conduct a PD review, and
you figure out something together. That’s how busi-
ness is supposed to work.
CapableCompany:
Danaher
Dan Comas
is an executive
vice president
and the chief
financial officer
of the Danaher
Corporation.
Thomas P. Joyce Jr.
is the president
and CEO of
Danaher.
Bill King
is the senior
vice president
of strategic
development at
Danaher.
PARTICIPANTS
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COMAS: In 1989, the Rales brothers hired George Sher-
man to become CEO. George was the chief operating
officer — the number two guy — at Black & Decker,
a much larger company at the time. Steve and Mitch,
who can be very persuasive, must have convinced him
that there would be a better future here.
SIMMS: The culture evolved from the top. With George
Sherman there was no confusion; DBS was the only
way to run the business. George was as conversant and
skilled in the tools as anybody I’ve ever met. He was
succeeded as CEO in 2001 by Larry Culp, who further
reinforced our practice. Larry posted notes for all staff
on the company’s intranet every day. We’d call it blog-
ging today. He’d write about that day’s kaizens. Some-
thing like, “It’s 9:00 at night and Simms is supposed to
be meeting me, but he’s not here because his team is still
in the plant moving equipment.” The excitement and
constant attention became part of the culture. Senior
managers were actually rated every year on their profi-
ciency with the DBS tools.
Once a year we gathered for the Danaher Leader-
ship Conference — a series of 40 or 50 presentations
over three days highlighting best practices for the top
100 to 150 leaders at the operating companies. One
example could be a story about how the water quality
platform has captured customer insights for accelerated
product development.
Another could be, “We finally learned to do policy
deployment right after 15 years.” Each presentation ex-
plained a problem, the root cause, the countermeasures
taken to solve it, what [the people involved would] do
differently in retrospect, and what they’d advise you to
do — with an email address and phone number. “Call
me, and we’ll talk about some ideas and people to help
get you started.”
Building Capabilities
HENK VAN DUIJNHOVEN: We generally start teaching the
Danaher Business System through classroom work and
then move to actually applying this improvement at
gemba [where the work is done: for example, the manu-
facturing floor, R&D, the lab, or on sales calls]. When
people participate in the implementation of tools, that
is as good a learning experience as you can have. We tie
together culture, capability building, and people devel-
opment this way.
LICO: The top 25 executives at Danaher, including the
CEO, all teach two or more weeks per year. In those
sessions, they don’t just teach; they create an environ-
ment where leaders can talk about the challenges of
their business. We have had kaizens with the CEO on
teams, in factories, and on the shop floor.
SIMMS: All senior executives regularly teach the tools
where they are certified. Before I retired, I was a black
belt with some of these tools, which meant I had a com-
mitment to lead others to use them and be evaluated on
the results. I often taught at companies in other parts
of Danaher that didn’t report directly to me. It would
signal a high level of importance when I spent a week
facilitating a team that wasn’t even in my group.
We always tried to incorporate new things into DBS
to have it grow and change as the portfolio changed.
Lots of companies use the DBS tools as individual tech-
niques. Danaher makes the tools part and parcel of the
culture. When I was recruited to Danaher from Black &
Kevin Klau
is president of
Hach Lange, and
a former vice
president of human
resources at
Danaher.
George
Koenigsaecker
is a former Danaher
senior executive
and a developer
of the original
Danaher Business
System. He is now
the owner of Lean
Investment.
Jim Lico
is an executive
vice president
of Danaher, and
the designated
president and
CEO of Fortive
Corporation, the
new company that
will spin off from
Danaher in 2016.
Chris McMahon
is a retired vice
president of
finance at Danaher.
Henk Van
Duijnhoven
is a retired senior
vice president,
formerly of
Danaher’s dental
businesses.
Steve Simms
(not pictured)
is a retired
executive vice
president of
Danaher.
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Decker, I immediately recognized that the culture was
unique and very powerful. My effectiveness and leverage
were far greater than anything I had seen elsewhere.
The senior management is quite good at calling
out “fake DBS.” It might be pretty charts in three di-
mensions and perfect colors. Or a cell diagram present-
ed by someone who can’t walk you through it when
you ask them to. Danaher has a fact-based culture. As
long as you have the facts or are willing to get them,
you’re safe. If you’re touting pabulum, that’s an unsafe
place to be.
CHRIS MCMAHON: The company doesn’t get distracted
by fads, like Six Sigma or management by objectives.
We’ve kept a very consistent long-term approach and
method. We just roll up our sleeves and do it. We know
we will fail a hundred times before we get it right. But
with businesses that have demonstrated this discipline
around core processes and tenets, slow and steady wins
the race. That has helped Danaher focus on long-term
growth, long-term margin expansion, and maintaining
a great cash flow record over many years.
LICO: We have been learning how to extend DBS to a
larger and larger scale for more than a decade. In 2003,
when I was running the DBS office, Mitch Rales asked
me how I was going to teach DBS to 24,000 people
in the next three or four years. I said, “We only have
24,000 people in the company.” Mitch said, “Yeah, but
we’re going to double in size in the next three or four
years and that’s our task.”
As we get larger, we want each operating company
thinking about how to scale DBS in its own way — as
opposed to somebody at corporate deciding. We’ve also
become more codified than we were in the early days.
We do more formal training and leadership develop-
ment.
VAN DUIJNHOVEN: Often new tools emerge from discus-
sions of the Danaher leadership team, which is the top
20 leaders, most of whom operate companies in the Dan-
aher system. This group gets together several times a
year. When we develop a new approach — for example,
a lead-generation tool for Web marketing — there’s not
some committee that does it; we all become students.
We quickly pick up everything we can from one anoth-
er; then we make sure that it works in our environment.
We typically implement a new tool by experiment-
ing with it at a Danaher company that is already rea-
sonably good, trying to take it to the next level. Then
we take what we learn to a few other companies. Of-
ten within 12 months, we’ve gone to all the operating
companies to demonstrate the tool. Not every operat-
ing company has to implement every tool; they choose
the tools that will enable them to achieve their strategic
goals, fix quality issues, or improve delivery or other
operating company objectives. Product life-cycle man-
agement fits companies that have an active product
pipeline, but it might not be important for one of our
businesses like ChemTreat, which provides solutions for
industrial cooling problems.
THOMAS JOYCE: A process orientation is fundamental to
DBS. The tools we use may not always be easy, but they
must be repeatable, sustainable, teachable, and simple.
SIMMS: In the early 2000s, [then CEO] Larry Culp
asked if I’d be willing to lead a team to identify oppor-
“We’ve kept a very consistent
long-term approach.We just
roll up our sleeves and do it.
We know we will fail a hundred
times before we get it right.”
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tunities for organic growth, beyond what we already
had. This came from an analysis that correlated organic
growth and superior shareholder value. We looked at
different ways of thinking about product development
and innovation inside and outside the company. We
talked about advanced skills in sales, and pricing as a
strategic weapon.
We looked for companies that were best in class; we
sent a team of people to Procter & Gamble. It’s a radi-
cally different company, but its concepts on innovation
stretched our thought process and led us to do a num-
ber of things differently. We went to Starbucks several
times to look at customer management. We talked to
experts on pricing and pricing analysis.
We customized what we learned to fit the Dan-
aher culture. Then we piloted the resulting organic
growth tools with targeted Danaher companies where
we thought we had the greatest opportunity and capac-
ity. Finally, we rolled it out across Danaher, by asking
every business to talk through a simple matrix of strat-
egies and growth tools. “If we’re going to be success-
ful in organic growth, which tools are going to get us
there? How do you build the internal muscle to be able
to eventually lead that process yourself?”
Meaningful Metrics
COMAS: We hear the same thing from everybody who
joins the company: Danaher is incredibly metric-orient-
ed. We measure everything on a real-time basis — al-
ways monthly, often weekly, sometimes daily, and even
hourly when you get down to a cell in a factory.
MCMAHON: In 2006, we stepped back and realized that
we had 150 key performance indicators. We were driv-
ing ourselves crazy with all these metrics and data. We
decided to narrow it to just the most important metrics.
Those are our eight core value drivers. We had to do
this if we wanted to scale up.
JOYCE: The first four core value drivers are core growth,
operating margin expansion, working capital returns,
and return on invested capital. Those are the four
shareholder-facing financial metrics.
The next two are customer-facing metrics. On-time
delivery is measured against when the customer wanted
us to deliver something (even if that is yesterday). Exter-
nal quality is a broad measure of every dimension of a
customer experience.
There are two associate-facing metrics. The inter-
nal fill rate is the percentage of managerial positions we
fill with internal candidates. Retention is the last metric.
Every Danaher business uses those eight metrics to an-
swer the question: Are we winning?
In each business, we have a disciplined cadence
of monthly operating reviews: eight-hour face-to-face
meetings with a standing agenda and 20 monthly ob-
jectives for each business. The operating review is al-
ways held at the local business, not in Danaher’s head-
quarters in Washington. It’s very data-driven. We focus
on things that are not going well and what we’re going
to do to improve them.
But the response to metrics is as important as the
numbers. If an operating review shows green on all
20 monthly objectives, we know we probably have an
issue. The objectives weren’t tough enough. And if
they’re red on 10 out of 20, the way the team responds
matters. You don’t want them to view it as OK, but you
don’t want them demoralized, either. You want them to
CapableCompany:
Danaher
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rise to the challenge, adopt stretch objectives, and seek
to improve.
You can walk up to a visual board on the shop floor
in any Danaher business, and the metrics have the same
labels: safety, quality, delivery, cost, and inventory. You
can look at progress against clear targets — monthly,
weekly, and daily cell-level targets. With that kind of
visibility and transparency in performance, it’s easy to
call it the way you see it. You can start a discussion by
saying, “Based on the data, we’re not making progress.”
We try to remember this is about winning in the
eyes of our customer and against the competition in the
market. People want to win because winning is fun.
SIMMS: In our strategic planning, we come back to two
questions. “What game are we trying to play? How are
we going to win within that space?” Everyone is expect-
ed to be able to answer those two questions in relatively
simple terms.
A Superior M&A Capability
COMAS: Our approach to finding acquisition targets was
20 years in the making. It started when we decided we
would not wait for Goldman Sachs to call us with their
prospects. Instead, we did our own up-front research
into prospective markets and started to build funnels of
names of companies to buy and industries to enter.
VAN DUIJNHOVEN: Other companies try to make one per-
fect bet. That’s a risky way of letting senior executives
with no experience sit on a lot of cash. Instead, we con-
tinue to explore many acquisitions and bring a signifi-
cant number to fruition. When you acquire frequently
enough, you learn what to do and what not to do. You
develop skill at assessment and integration, and you
learn to hold these assets over a longer time than might
happen in private equity.
Our main criterion: Through this acquisition, can
we ultimately become one of the market leaders in that
industry? That typically requires that we pick up one of
the stronger brands or assets within that industry, and
that we generate at least as much value as, if not more
value than, the current owners do.
BILL KING: Often, when you do one deal, everybody
thinks you’re not going to do another, so competitors
come in thinking they have an advantage. On the con-
trary, we look for complementary companies to buy
before we make an offer. When we bought Beckman
Coulter in 2011, we were already aware that we wanted
to buy Blue Ocean Biomedical, a cytometry firm that
could reinvigorate Beckman’s hematology business. We
snatched it up within six months of closing on Beckman.
JOYCE: We have a very disciplined M&A process. It
starts with having a clear sense of what markets we find
attractive. We look for large global markets with good
growth profiles and generally low cyclicality. We also
look for the ability to develop sustainable competitive
advantage through a brand and intellectual property.
We also look, obviously, for good profitability and low
capital intensity. If we don’t like the market, we don’t
bother looking at specific companies.
COMAS: We find that businesses with more branded
products, especially those used by professionals, are
inherently more profitable. Their products have more
pricing power. They are also often poorly managed
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from a cost perspective. They’re making money from
their technology and brand, but manufacturing, supply
chain, and the back office are afterthoughts. We some-
times have to explain to analysts why these companies,
which might have a 50 percent gross margin, are at-
tractive. It’s easier to improve their performance than it
would be to improve a very well-managed manufacturer
of industrial products that has a 25 percent gross mar-
gin. It sounds counterintuitive until you think about it.
MCMAHON: We do 12 to 14 deals a year and turn down
10 times that, so we’re doing 150 due diligences a year
all over the world. We do extensive due diligence on
each one. Our pre-acquisition investigations, especially
on the finance side, are designed to dig up, expose, and
share every bit of risk, making sure we all know what
we’re getting ourselves into. If something looks scary,
let’s make sure we sit around the table and figure it out
or walk away. We try to be patient and not to get emo-
tionally tied to any particular investment.
JOYCE: Larry Culp, my predecessor as CEO, could tell
you stories about how long he cultivated Kathryn and
Clifford Hach before acquiring the company they
founded, the Hach Company, in 1999. It would make
you wonder why we didn’t give up a lot sooner, but the
model has proved successful. You’d have to go back to
our earliest days to find a hostile takeover.
COMAS: We might say to a company leader, “You don’t
know us, but we’re interested in this space, and one
day, if you think of selling your business, please talk to
us. We have a long-term point of view and would like
to stay in touch over time.” That’s proven to be a very
powerful tool. At any point we’re probably cultivating
200 companies that aren’t for sale today. We’ve culti-
vated some companies for 10 years. When they’re ready
to sell, they’ll often come to us because they know we’re
interested and they understand how we operate.
During due diligence, we assess their potential with
the same metrics we use in our daily business. “Here’s
this company’s profitability today; where do we think
we can get it in three years? What are the five or six
building blocks to get there?” We look at it from the
perspective of the factory, people, go-to-market invest-
ments, and new products.
We publicly announce the return metric we want to
see within a stated time period, and how we think we’re
going to get there. When we started doing this, at least
one banker warned us against it; it might tie our hands
on a potential deal. But it’s worked the other way. In-
vestors are comfortable with this approach. They under-
stand that once the bidding on a deal gets up to a level
where we no longer can hit our return, we move on.
We also assess whether management will buy into
the Danaher Business System. We have passed when we
felt we could not work with the management team. On
average, we probably change two or three of the 10 top
roles in a new acquisition. Often we replace the CFO,
because we’re very metric-oriented, and we want some-
one in place there who understands the Danaher metrics.
JOYCE: For each acquired company, we establish a tar-
get of having a strategic plan in place within 100 days
of the closing of the transaction. That process creates
alignment, and allows us to quickly establish and recon-
firm the financial targets from our due diligence. Due
diligence only goes so far, and we need the company
CapableCompany:
Danaher
“Our main M&A criterion:
Through this acquisition,
can we ultimately become
one of the market leaders
in that industry?”
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12. strategy+businessissue82
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management teams to play an integral role in defining a
path for their future, in concert with us.
LICO: We ask all the companies why they do what they
do. People quickly understand that we’re not trying to
change everything. We’re really trying to help the busi-
ness be better. A famous phrase we use at Danaher is
“don’t let perfect get in the way of better.”
We bought Beckman Instruments because we
wanted the Beckman Coulter brand of biomedical
laboratory instruments. We were very aware of what
it had taken to build the strength of that brand over
100 years. We knew if we tried to change everything,
we would trash the culture of Beckman and lose the
brand continuity. We tried to preserve what was great
about that business at the same time we brought in
aspects of Danaher that added value. Beckman is suc-
cessful today because its leadership and the associates
embraced DBS.
As we buy companies, we learn new things. The
dental businesses had great sales management prac-
tices that were new to us. When we acquired Fluke and
Hach, we learned better product management. When
we bought Tektronix and some of the life sciences
businesses, we learned more about technology devel-
opment, advanced R&D, and software development.
And those learnings were incorporated into all Danaher
businesses. One of the most important things we can
say about DBS is that it improves and changes as our
portfolio changes.
The Soul of a Company
COMAS: We devote a lot of attention to the people we
hire — both in recruiting them and in helping them be
successful here. For many years we have worked with a
group of psychologists to develop a custom assessment
for Danaher executives, covering both talent and cul-
tural fit. You do not come into the organization at mid-
level or above without completing it.
We look for people who are aggressive, smart,
metric-oriented, OK with failure, nonpolitical, and not
defensive. We want someone who is capable of saying,
in a meeting with the CEO, “Hey, we underperformed
this quarter. These are the three reasons we underper-
formed, and this is what we’re going to do differently to
change that.”
SIMMS: Often, the critical factor when you consider hir-
ing an executive at Danaher is whether he or she can
buy into the culture of process development and con-
tinuous improvement. For example, there might be a
sales leader or manufacturing executive who has grown
up in a culture of delivering his commitments through
brute force or other “heroics” at the end of the quarter.
At the end of the day, though, he didn’t leave a strong
organization in place. That approach may be successful
in some companies, but not at Danaher. Our goal is
to hire, develop, and retain strong leaders who can cre-
ate and continuously improve the necessary processes
to achieve our goals and the expectations — without
the need for brute force. That’s what creates competi-
tive advantage.
KEVIN KLAU: We throw key new hires into immersion.
For 60 to 90 days, they don’t do their job. They are
challenged with understanding the culture, experienc-
ing Danaher in a variety of ways. It lets them build
their internal network. It helps them understand what
CapableCompany:
Danaher
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13. featurestitleofthearticle
12
“good” looks like, and where different businesses and
organizations are on their growth journeys. Then we
drop them in their chairs better positioned to ask the
right questions to drive performance in their function,
with a better understanding about DBS, what makes
this culture unique, and where to go internally to lever-
age best practices.
JOYCE: We also have an immersion process for acquisi-
tions, aimed at the many leaders who join us that way.
But when we acquire a new business, we can’t take the
entire leadership team out of their jobs for weeks. In-
stead, we conduct immersion over a longer period of
time. It may take a year or two.
We put the leadership team through a three-day
training that covers all the basics of DBS. It provides an
orientation to the tools. We give them kaizen experienc-
es; they go to operating reviews at other businesses. We
send Danaher experts into that business for an eight-
hour operating review every month.
We look for a specific opportunity for performance
improvement, often one that the team in the business
has identified, that they have been dying to knock over
for a long time. We organize our first weeklong kaizen
around it, bringing together the senior team of the in-
coming business and some DBS leadership. We demon-
strate the power of DBS tools and the fun that comes
from knocking over a big problem in short order. And
they start to turn the corner.
LICO: We have the soul of a small company. We still re-
member the day when we all pitched in to ship product
on Fridays if the warehouse was full, or we took a tech
support call even if we were top executives. Although
those days are long gone, we remember and long to keep
that culture while learning and evolving in ways appro-
priate for our future.
COMAS: A lot of the leaders here like to be part of some-
thing special. We are sometimes compared to private
equity firms because we are so acquisitive. We bristle at
that a little, because this is not how we are wired. We
rarely sell businesses. Sure, we want to monetize what
we bought, just as much as private equity does, but we
do it in a very different way. We aren’t passionate about
selling the business. We’re passionate about building
the business. +
Reprint No. 16109
Resources
Bill Fischer, Umberto Lago, and Fang Liu, “The Haier Road to Growth,”
s+b, Apr. 27, 2015: The Chinese appliance maker continually reinvents
itself and expands around the world.
Paul Leinwand and Cesare Mainardi, with Art Kleiner, Strategy That
Works: How Winning Companies Close the Strategy-to-Execution Gap
(Harvard Business Review Press, 2016): Danaher was one of 14 compa-
nies studied that succeeded through the way they built and used distinc-
tive capabilities.
J. Neely, John Jullens, and Joerg Krings, “Deals That Win,” s+b, July 14,
2015: Why Danaher and other capabilities-driven serial acquirers do so
well at M&A.
Thomas A. Stewart, “CEMEX’s Strategic Mix,” s+b, Apr. 13, 2015:
Another company that distinguishes itself through the things it does
consistently well.
More thought leadership on this topic:
strategy-business.com/strategy_and_leadership
“We have the soul of a small
company.We still remember
when we all pitched in to
ship product on Fridays if
the warehouse was full.”
featurestrategy&leadership
12

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